CME Group’s flash data for gold futures markets noted traders reduced their open interest positions by nearly 14K contracts on Monday. Volume, on the other hand, increased for the second session in a row, this time by around 152.2K contracts.

Gold targets the next up-barrier at $2150

Gold prices rose to a new all-time high around $2150 per troy ounce at the beginning of the week, although it ended the session with a marked retracement. The downtick, however, was accompanied by shrinking open interest, leaving the door open to the continuation of the ongoing uptrend. That said, the immediate hurdle emerges at the record peak of $2150 (December 4).

Here is what you need to know on Tuesday, December 5:

The US Dollar (USD) capitalized on safe haven flows and rising US Treasury bond yields to outperform its major rivals to start the week. After gaining nearly 0.5% on Monday, the USD Index stabilized above 103.50 early Tuesday, with investors shifting focus to JOLTS Job Openings data for October and the ISM's Services PMI survey for November.

Wall Street's main indexes opened deep in negative territory and continued to stretch lower on the first trading day of the week as participants moved away from risky assets on growing fears over the Israel-Hamas crisis turning into a widespread conflict in the Middle East. At the time of press, US stock index futures were down between 0.2% and 0.4%, showing no signs of an improvement in risk mood. Speaking on the situation in Gaza, "every time we think things cannot get any more apocalyptic in Gaza, they do,” said Martin Griffiths, the top UN emergency relief official, in a statement Monday, per CNN. "People are being ordered to move again, with little to survive on, forced to make one impossible choice after another."

Following the December policy meeting, the Reserve Bank of Australia (RBA) announced that it left the policy rate unchanged at 4.35% as expected. "Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks," the RBA repeated in the policy statement. AUD/USD came under bearish pressure and declined below 0.6600.

EUR/USD fell toward 1.0800 and touched its lowest level in over two weeks on Monday. Although the pair rebounded to the 1.0850 area toward the end of the American session, it struggled to preserve its recovery momentum and was last seen fluctuating slightly below that level.

GBP/USD lost more than 50 pips on Monday and stabilized below 1.2650 early Tuesday. The UK economic docket will not feature any high-tier macroeconomic data releases.

USD/JPY registered small gains on Monday but found it difficult to settle above 147.00 during the Asian trading hours on Tuesday. The data from Japan showed earlier in the day that the Tokyo Consumer Price Index rose 2.6% on a yearly basis in November, at a softer pace than the 3.3% increase recorded in October.

Gold made a sharp downward correction after hitting a new all-time high near $2,150 on Monday and closed deep in negative territory. XAU/USD was last seen consolidating its losses below $2,050.

Further losses could drag EUR/USD to 1.0770 in the next few weeks, according to UOB Group’s Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia.

Key Quotes

• EUR/USD extends its downside around 1.0834 ahead of the Eurozone PMI data.
• The pair maintains the bearish outlook below the key 100-hour EMA; RSI stands in the bearish zone below the 50.0 midline.
• 1.0867 acts as an immediate resistance level; 1.0806 will be the initial support level.

The EUR/USD pair trades in negative territory for the fifth consecutive day during the early European session on Tuesday. Investors await the Spanish, German, French, and Eurozone HCOB PMI data due later on Tuesday. The major pair currently trades near 1.0834, unchanged for the day.

From a technical perspective, EUR/USD maintains a bearish outlook as the major pair holds below the key 100-hour Exponential Moving Averages (EMA) on the four-hour chart. The downward momentum is supported by the Relative Strength Index (RSI) which stands below the 50.0 midline, indicating that the path of least resistance is to the downside.

The 100-hour EMA at 1.0867 acts as an immediate resistance level for EUR/USD. The next upside barrier to watch is the 1.0895-1.0900 zone, portraying the confluence of the 50-hour EMA and a psychological figure. Further north, the next hurdle is seen near the upper boundary of the Bollinger Bang at 1.0942.

On the other hand, the lower limit of the Bollinger Band at 1.0806 will be the initial support level. The additional downside filter to watch is a high of November 6 at 1.0755, followed by a low of November 9 at 1.0660.

EUR/USD four-hour chart

European Central Bank (ECB) executive board member Isabel Schnabel said on Tuesday, “further rate hikes are ‘rather unlikely’ after latest inflation data.”

Additional quotes

Market reaction

At the time of writing, EUR/USD is trading modestly at around 1.0840, unperturbed by the above comments.

• WTI loses traction near $73.30 on concern about oil demand.
• China's Services PMI surged to 51.5 in November vs. 50.4 prior.
• Oil traders await the US ISM Services PMI, due later on Tuesday.

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around $73.30 so far on Tuesday. WTI prices attract some sellers as investors are concerned about oil demand and the uncertainty about the depth and duration of OPEC+ supply cuts.

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) agreed to voluntary output cuts for the first quarter of 2024. However, investors doubt how output cutbacks will be measured.

Early Tuesday, China's Services Purchasing Managers' Index (PMI) surged to 51.5 in November from the October reading of 50.4, better than the estimation of 50.8. However, the NBS Manufacturing and Services PMI data last week came in worse than expected. The mixed Chinese economic data raises concerns about the recovery of China’s economy. This, in turn, weighs on the black gold, as China is the world's largest gold producer and consumer.

Looking ahead, oil traders will monitor the US ISM Services PMI due on Tuesday. Later this week, the attention will shift to the Nonfarm Payrolls on Friday. These events could significantly impact the USD-denominated WTI price. Oil traders will take cues from the data and find trading opportunities around WTI prices.

 

• USD/CAD scales higher for the second straight day amid bearish Crude Oil prices.
• The risk-off mood benefits the safe-haven USD and contributes to the downfall.
• The US macro data could provide some impetus ahead of the BoC on Wednesday.

The USD/CAD pair builds on the previous day's recovery move from the 1.3480 region, or its lowest level since September 29 and gains positive traction for the second successive day on Tuesday. The momentum lifts spot prices to a three-day top, beyond mid-1.3500s during the Asian session and is sponsored by bearish Crude Oil prices.

Investors remain, sceptic, that supply cuts by OPEC+ would have a significant impact on the back of a darkening global economic outlook, which is expected to dent fuel demand. This, in turn, drags the black liquid back closer to a multi-month low touched in November, which is seen undermining the commodity-linked Loonie and lending some support to the USD/CAD pair. Apart from this, expectations that the Bank of Canada (BoC) will start cutting interest rates in the second quarter of 2024 further seem to weigh on the Canadian Dollar (CAD).

The US Dollar (USD), on the other hand, draws some support from the global flight to safety, though dovish Federal Reserve (Fed) expectations keep a lid on any further gains. Market participants now seem convinced that interest rates in the US have peaked and that the Fed will start easing its monetary policy as soon as March 2024. This leads to a fresh leg down in the US Treasury bond yields, which holds back the USD bulls from placing aggressive bets and might keep a lid on any meaningful appreciating move for the USD/CAD pair.

The aforementioned mixed fundamental backdrop makes it prudent to wait for strong follow-through buying before confirming that spot prices have bottomed out in the near term and positioning for any further gains. Traders now look to the US economic docket, featuring the release of ISM Services PMI and JOLTS Job Openings data. This, along with the US bond yields and the broader risk sentiment, will drive the USD demand. Apart from this, Oil price dynamics should provide some impetus to the USD/CAD pair ahead of the BoC decision on Wednesday.

Technical levels to watch

• Gold price attracts fresh buyers and reverses a part of the overnight sharp fall from the record peak.
• Fed rate cut bets drag the US bond yields lower, which weighs on the USD and lends some support.
• The risk-off impulse further benefits the safe-haven metal ahead of this week’s key US macro data.

Gold price (XAU/USD) witnessed a dramatic intraday turnaround on Monday and retreated nearly $125 after the initial rally to a fresh all-time high, around the $2,144-2,145 region. The sharp pullback, however, stalled near the $2,020 area in the wake of growing acceptance that interest rates in the United States (US) have peaked. Moreover, the markets have been pricing in an eventual dovish pivot by the Federal Reserve (Fed) and a greater chance of a rate cut by March 2024.

Dovish Fed expectations, meanwhile, trigger a fresh leg down in the US Treasury bond yields and fail to assist the US Dollar (USD) to capitalize on the previous day's strong move up to over a one-week high. This, in turn, is seen as a key factor acting as a tailwind for the non-yielding Gold price. Apart from this, escalating geopolitical tensions in the Middle East and China's woes lift the safe-haven precious metal back to the $2,035 area during the Asian session on Tuesday.

It, however, remains to be seen if the Gold price can capitalize on the modest intraday uptick as traders might prefer to wait on the sidelines and refrain from placing fresh directional bets ahead of this week's key US macro releases. The US ISM Services PMI and JOLTS Job Openings data are due for release later this Tuesday. This will be followed by the ADP report on private-sector employment ahead of the closely-watched Nonfarm Payroll (NFP) on Friday.

Daily Digest Market Movers: Gold price continues to draw support from dovish Fed hopes and a softer risk tone

• A combination of supporting factors assists the Gold price to regain some positive traction on Tuesday and stall the overnight sharp retracement slide from the $2.144-2,145 area, or the record peak.
• Geopolitical risks and concerns over a new epidemic in China overshadow the upbeat private survey from China, showing that business activity in the services sector grew at a faster pace in November.
• China's Caixin Services PMI accelerated from 50.4 in October to 51.5 during the reported month, beating market expectations for a reading of 50.8, though it remains well below pre-COVID levels.
• Despite Federal Reserve Chair Jerome Powell's hawkish remarks on Friday, markets seem convinced that the US central bank is done raising rates and may start easing by the first half of the next year.
• The CME group's FedWatch Tool indicates a nearly 60% chance for an interest rate cut by the Fed in March 2024, which drags the US bond yields lower and acts as a headwind for the US Dollar.
• Furthermore, concerns about a darkening global economic outlook temper investors' appetite for riskier assets and drive some flows toward the perceived traditional safe-haven precious metal.
• Traders now look forward to the US ISM Services PMI, which is expected to tick higher to 52 for November from 51.8 in the previous month, for some short-term opportunities.
• The focus, however, will remain on the release of the US monthly employment details, popularly known as the NFP report on Friday, which will shed more light on the labor market conditions.

Technical Analysis: Gold price seems poised to appreciate further, occurrence of a golden cross comes into play

From a technical perspective, the overnight breakdown below the 50% Fibonacci retracement level of the recent rally witnessed over the past three weeks or so warrants caution for bullish traders. That said, oscillators on the daily chart have eased from the overbought conditions and are still holding comfortably in the positive territory. Apart from this, the occurrence of a golden cross, with the 50-day Simple Moving Average (SMA) rising above the 200-day SMA, suggests that the path of least resistance for the Gold price is to the upside.

Meanwhile, any subsequent move up is likely to confront some resistance near the $2,045-2,046 area, above which the XAU/USD could accelerate the momentum and climb to the next relevant hurdle around the $2,070 region. Some follow-through buying should allow bulls to reclaim the $2,100 round figure. On the flip side, the $2,026-2,020 area now seems to protect the immediate downside ahead of the 61.8% Fibo. level, around the $2,012 zone and the $2,000 psychological mark. A convincing break below the latter will suggest that the Gold price has topped out in the near term and pave the way for some meaningful depreciating move.

• Indian Rupee edges higher amid the decline in oil prices, US Treasury bond yields.
• The Reserve Bank of India (RBI) is likely to maintain an interest rate pause at 6.50% at its December meeting.
• Market players await the Indian and US Services PMI, due later on Tuesday.

Indian Rupee (INR) trades stronger on Tuesday on the decline in oil prices and lower US Treasury bond yields. Prime Minister Narendra Modi's Bharatiya Janata Party won the elections in three of the five Indian states that had recently gone to the polls. That being said, the election results will likely be positive for equities inflows, alleviating some pressure on INR devaluation in the near term.

The Reserve Bank of India (RBI) is expected to announce a continuation of its pause on the interest rate at 6.50% and maintain a hawkish stance on Friday. Analysts predict a fifth consecutive pause by the Monetary Policy Committee (MPC) due to concerns about potential food price shocks affecting inflation expectations.

Ahead of the RBI interest rate decision, investors will keep an eye on the S&P Global India Services PMI for November, due on Tuesday. The figure is expected to ease from 58.4 to 58.0. Additionally, the US ISM Services PMI will be released later in the day, which is expected to rise from 51.8 to 52.0.

Daily Digest Market Movers: Indian Rupee gains traction amid challenges and uncertainties

• RBI is likely to be selling the US dollar near the 83.38–83.39 Rupee levels, per Reuters.
• RBI Governor Shaktikanata Das said that headline inflation has moderated, and the Indian economy remains vulnerable to overlapping food price shocks coming from global factors and adverse weather events.
• India’s second-quarter Gross Domestic Product grew 7.6%, marking her the world’s fastest-growing major economy, driven by manufacturing and the government's spending.
• US Factory Orders fell 3.6% MoM in October from the previous reading of 2.3%.
• US ISM Manufacturing PMI remained unchanged at 46.7 in November, weaker than expected.
• According to the CME FedWatch Tool, Fed futures are pricing in a 60% odds of a rate cut at the Fed's March meeting, up from 21% over a week ago.

Technical Analysis: Indian Rupee’s positive outlook remains unchanged

Indian Rupee drifts higher on the day. The USD/INR pair has traded within a familiar trading band of 82.80–83.40 since September. From the technical perspective, the bullish tone of USD/INR will prevail as long as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. This upward momentum is supported by the 14-day Relative Strength Index (RSI) that bounced off the 50.0 midline, indicating the further upside looks favorable.

A decisive break above the upper boundary of the trading range of 83.40 will pave the way to the year-to-date (YTD) high of 83.47, en route to a psychological round figure of 84.00. On the flip side, the critical support level is seen at the 83.00 psychological mark. Further south, the next contention to watch is the confluence of the lower limit of the trading range and a low of September 12 at 82.80, followed by a low of August 11 at 82.60.

• AUD/USD loses traction near 0.6575 following the Reserve Bank of Australia (RBA) monetary policy meeting.
• The RBA decided to hold the rate unchanged at 4.35%, as widely expected.
• The market has priced in 97% odds that the Fed will keep the rate unchanged at a range of 5.25% to 5.50% in the next meeting.
• Investors will monitor the US ISM Services PMI, due later on Tuesday.

The AUD/USD pair loses ground below the 0.6600 psychological round mark during the Asian trading hours on Tuesday. The pair faces some selling pressure after the Reserve Bank of Australia's (RBA) monetary policy meeting. The pair currently trades near 0.6575, down 0.70% for the day.

The Reserve Bank of Australia (RBA) board members decided to maintain the interest rate unchanged at 4.35% at its December monetary policy meeting on Tuesday. The RBA’s Governor Michele Bullock said whether additional monetary policy tightening is necessary to ensure that inflation returns to target would be determined by the data and the developing risk assessment.

Bullock further stated that holding the cash rate steady at this meeting would give the RBA time to assess the impact of the interest rate rises on demand, inflation, and the labor market.

On the USD’s front, the Federal Reserve (Fed) Chair Jerome Powell reinforced expectations that the central bank will no longer hike additional rates in its December meeting and may begin cutting rates by March 2024. According to the CME FedWatch Tool, the market has priced in 97% odds that Fed will keep the rate unchanged at a range of 5.25% to 5.50% in the next meeting and there is a more than 50% chance that Fed will trim rates by 25 basis points (bps) as soon as March of next year, up from around 21% one week ago. This, in turn, might weigh on the US Dollar and act as a tailwind for the AUD/USD pair.

Market participants will shift their focus to the US ISM Services PMI, due later on Tuesday. Later this week, the Australian Gross Domestic Product for the third quarter (Q3) will be released, which is forecasted to remain steady at 0.40%. These figures could trigger the volatility in the market and give a clear direction to the AUD/USD pair.

• AUD/JPY drifts lower for the second straight day and dives to a three-week low on Tuesday.
• The RBA decided to keep its benchmark interest rate unchanged, as was widely anticipated.
• The accompanying policy statement weighs on the Aussie amid a generally softer risk tone.

The AUD/JPY cross remains under some selling pressure for the second successive day on Tuesday and touches a three-week trough during the Asian session. The downward trajectory picked up pace after the Reserve Bank of Australia (RBA) announced its policy decision and dragged spot prices further below the 97.00 round-figure mark.

As was widely anticipated, the Australian central bank decided to keep the Official Cash Rate (OCR) unchanged at the end of the December meeting. In the accompanying policy statement, the RBA noted that the monthly CPI indicator for October suggested that inflation is continuing to moderate and conditions in the labour market, though remaining tight, also continued to ease gradually. This suggested that additional rate hikes might be off the table and prompted fresh selling around the Australian Dollar (AUD).

The Japanese Yen (JPY), on the other hand, draws support from the growing market conviction that the Bank of Japan (BoJ) will begin tightening its ultra-loose policy and end its yield curve control measures during the first few months of 2024. Apart from this, the risk-off impulse, as depicted by a generally weaker tone around the equity markets, is seen as another factor benefitting the JPY's relative safe-haven status against the perceived riskier Aussie. This further contributes to the offered tone surrounding the AUD/JPY cross.

Technical levels to watch

• GBP/USD trades with a mild positive bias on Tuesday amid subdued USD price action.
• Fed rate cut bets trigger a fresh leg down in the US bond yields and undermine the USD.
• A softer risk tone helps limit losses for the safe-haven buck and keeps a lid on the pair.

The GBP/USD pair edges higher during the Asian session on Tuesday and looks to build on the overnight bounce from the 1.2600 mark, representing the lower boundary of a one-week-old trading range. Spot prices currently hover around the 1.2630-1.2635 region and draw support from a combination of factors.

The US Dollar (USD) struggles to capitalize on the previous day's strong move up to over a one-week top amid expectations that the Federal Reserve (Fed) will not hike interest rates again and may start easing its policy as early as March 2024. This triggers a fresh leg down in the US Treasury bond yields and keeps the USD bulls on the defensive, which, in turn, is seen as a key factor acting as a tailwind for the GBP/USD pair.

The British Pound (GBP), on the other hand, is underpinned by diminishing odds for an early rate cut by the Bank of England (BoE). In fact, BoE Governor Andrew Bailey recently warned that it was too early to declare victory over inflation and predicted that monetary policy will have to stay restrictive for quite some time to make sure that inflation gets back to the 2% target. This further contributes to the GBP/USD pair's uptick.

That said, a softer risk tone is seen lending some support to the safe-haven Greenback and holding back traders from placing aggressive directional bets. Investors also seem reluctant and prefer to wait on the sidelines ahead of this week's important US macro data, starting with the release of the ISM Services PMI later during the early North American session. The focus, however, will remain on the key US NFP report on Friday.

Nevertheless, the aforementioned fundamental backdrop seems tilted in favour of bullish traders and suggests that the path of least resistance for the GBP/USD pair is to the upside. However, it will still be prudent to wait for a sustained move beyond the 1.2725-1.2730 supply zone, or the top end of a short-term trading range, before positioning for any further appreciating move ahead of the final UK Services PMI print.

Technical levels to watch

• The Japanese Yen ticks lower against the USD following the release of a softer Tokyo CPI report.
• Expectations for an imminent BoJ policy shift and a softer risk tone help limit losses for the JPY.
• Fed rate cut bets keep the USD bulls on the defensive and act as a headwind for the USD/JPY pair.

The Japanese Yen (JPY) edges lower against its American counterpart during the Asian session on Tuesday after data showed that consumer inflation in Tokyo – Japan's capital city – eased more than expected in November. In fact, Tokyo's core CPI, which excludes volatile items such as fresh food, was the closest to the Bank of Japan's (BoJ) 2% annual target since June 2022. This comes on top of the recent less-hawkish remarks by BoJ board members, downplaying the chance of an imminent shift in the policy stance and ending the negative interest rate regime, which turns out to be a key factor undermining the JPY.

Investors, however, seem convinced that the BoJ will eventually begin tightening its ultra-loose policy and end its yield curve control measures during the first few months of 2024. This, along with a softer risk tone, underpins the safe-haven JPY. The US Dollar (USD), on the other hand, struggles to capitalize on the previous day's move up to over a one-week peak amid growing acceptance that the Federal Reserve (Fed) is done with its policy-tightening campaign and will soon start cutting interest rates. This, in turn, keeps a lid on the USD/JPY pair's recovery from a near three-month low touched on Monday.

Traders also seem reluctant to place aggressive bets and prefer to wait for this week's key US macro releases, starting with the ISM Services PMI and JOLTS Job Openings data later this Tuesday. The US ADP report on private-sector employment is due on Wednesday, though the focus will remain glued to the official jobs report – popularly known as the Nonfarm Payrolls on Friday.

Daily Digest Market Movers: Japanese Yen is undermined by a weaker data set

• Data released this Tuesday showed that the headline Tokyo CPI decelerated from 3.3% to the 2.6% YoY rate in November, though it remained above the Bank of Japan's 2% target for the 18th consecutive month.
• The Core CPI, which excludes volatile items such as fresh food, was flat month-on-month and the yearly rate eased more than anticipated, from 2.7% in October to 2.3% during the reported month.
• Another core gauge, which excludes both fresh food and fuel prices and is used as an indicator of underlying inflation by the BoJ, fell from the 3.8% YoY rate in the prior month and came in at 3.6%.
• Investors, however, continue to price in the possibility of an exit from negative interest rate policy by the BoJ in 2024, which, along with a softer risk tone, lends some support to the Japanese Yen.
• The final au Jibun Bank Service PMI came in at 50.8 for November, below the flash reading of 51.7. This was the slowest pace of growth in a year, signalling a further loss of momentum in the services sector.
• An escalation of geopolitical tensions in the Middle East tempers investors' appetite for riskier assets while the overnight rebound in the US bond yields took its toll on tech stocks.
• Bets that the Federal Reserve may begin easing as soon as March 2024 cap the US bond yields and the recent US Dollar recovery from a multi-month low, acting as a headwind for the USD/JPY pair.
• Investors now look forward to the release of the US ISM Services PMI for some impetus later during the North American session, though the focus will remain on the closely-watched NFP report on Friday.

Technical Analysis: USD/JPY struggles to move back above 100-day SMA, 38.2% Fibo. level holds the key for bulls

From a technical perspective, the USD/JPY pair on Monday found some support and attracted buyers near the 146.20 region, representing the 38.2% Fibonacci retracement level of the July-October rally. The subsequent move up, however, fails to make it through the 100-day Simple Moving Average (SMA) pivotal support breakpoint, warranting some caution for bullish traders. That said, a sustained strength beyond could trigger a short-covering rally and allow the USD/JPY pair to reclaim the 148.00 mark. The momentum could get extended further, though is likely to remain capped near the 148.25-148.30 horizontal barrier.

On the flip side, weakness back below the 147.00 mark might expose the multi-month low, around the 146.20 region, or the 38.2% Fibo. level tested on Monday. Some follow-through selling, leading to a subsequent slide through the 146.00 mark, will be seen as a fresh trigger for bearish traders. The USD/JPY pair might then accelerate the fall towards the next relevant support near the 145.45-145.40 region en route to the 145.00 psychological mark and the 50% Fibo. level, around mid-144.00s.

• AUD/USD drifts lower for the second straight day, though lacks follow-through selling.
• A softer risk tone is seen as a key factor undermining the risk-sensitive Australian Dollar.
• The better-than-expected release of China Caixin Services PMI does little to impress bulls
• Dovish Fed hopes undermine the USD and lend some support ahead of the RBA decision.

The AUD/USD pair remains under some selling pressure for the second straight day on Tuesday and reacts little to the better-than-expected release of Chinese data. Spot prices currently trade around the 0.6615-0.6610 region, down less than 0.10% for the day, as traders keenly await the Reserve Bank of Australia (RBA) policy decision.

A private survey showed that business activity in China's services sector grew at a faster pace in November. China's Caixin Services PMI accelerated to 51.5 during the reported month from 50.4 in October, beating expectations for a reading of 50.8. This, however, does little to influence the AUD/USD pair or provide any meaningful impetus amid a generally softer risk tone, which tends to undermine the risk-sensitive Australian Dollar (AUD).

Meanwhile, dovish Federal Reserve (Fed) expectations keep a lid on the recent US Dollar (USD) recovery from a multi-month low. This, in turn, helps limit the downside for the AUD/USD pair ahead of the key central bank event risk. The RBA is widely expected to keep interest rates on hold. Hence, investors will look for cues about future rate hikes, amid some stickiness in Australian inflation, before placing fresh directional bets around the major.

Later during the early North American session, traders will take cues from the release of the US ISM Services PMI. This, along with the US bond yields and the broader risk sentiment, will drive demand for the safe-haven buck and allow traders to grab short-term opportunities around the major.

Technical levels to watch

• NZD/USD loses ground near 0.6162 on the firmer USD. 
• New Zealand’s ANZ Commodity Price came in at a 1.3% drop in November from a 2.9% rise in October.
• US Factory Orders dropped 3.6% MoM in October versus a 2.3% rise prior. 

The NZD/USD pair holds positive ground around the mid-0.6100s during the early Asian session on Tuesday. The recovery of the pair is backed by the stronger-than-expected Chinese data. At press time, NZD/USD is trading near 0.6162, down 0.06% on the day. 

The latest data from National Bank ANZ showed on Tuesday that New Zealand’s ANZ Commodity Price came in at a 1.3% drop in November from a 2.9% rise in October. Earlier this week, New Zealand’s Terms of Trade Index for the third quarter (Q3) declined 0.6% QoQ versus 0.3% prior. Good Export prices dropped 1.5% QoQ from the previous reading of a 6.8% rise while Import prices for goods declined 0.8% QoQ from a 1.0 drop in the previous reading.

Elsewhere, China's Services Purchasing Managers' Index (PMI) surges to 51.5 in November from the October reading of 50.4. The markets had expected a print of 50.8. The upbeat data from China boosts the China-proxy New Zealand Dollar (NZD) as China is New Zealand's largest trading partner. 

That being said, the hawkish tilt from the Reserve Bank of New Zealand (RBNZ) lifts the New Zealand Dollar (NZD) and acts as a tailwind for the NZD/USD pair. It’s worth noting that RBNZ held the cash rate steady at 5.5% last week but noted inflation remained too high and that further policy tightening might be needed if price pressures did not ease.

On the other hand, the market is now pricing the US Federal Reserve (Fed) to end the tightening cycle and will begin cutting the rate as early as next March. Fed Chair Jerome Powell stated on Friday that it was premature to rule out additional rate hikes or start discussing cuts.

On Monday, the US Factory Orders dropped 3.6% MoM in October versus a 2.3% rise prior, according to the US Census Bureau. Market players await the US ISM Services PMI, which is expected to rise from 51.8 to 52.0.

The US Nonfarm Payrolls (NFP) report on Friday will be in the spotlight, which is expected to add 180K jobs in November. Traders will take cues from these events and find trading opportunities around the NZD/USD pair. 

China's Services Purchasing Managers' Index (PMI) jumped to 51.5 in November, as against the October reading of 50.4, the latest data published by Caixin showed on Tuesday. The markets had expected a print of 50.8.

Key points

Commenting on the China General Services PMI ™ data, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said: “Both services supply and demand expanded, as the market continued to heal. The gauges for business activity and total new orders were above 50 for the 11th consecutive month and hit three-month highs.”

“However, some surveyed companies reported that the market improvement was slightly weaker than expected,” Wang added.

AUD/USD reaction to China’s Services PMI

Strong Chinese Services PMI lends some support to the Aussie Dollar, keeping AUD/USD afloat above 0.6600. The pair is trading at 0.6612, still down 0.12% on the day, at the time of writing.

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Tuesday at 7.1127 as compared to the previous day's fix of 7.1011 and  7.1476 Reuters estimates.

• EUR/USD posts modest gains around 1.0840 in early Tuesday.
• US factory orders fell 3.6% MoM in October versus a 2.3% rise prior.
• The European Central Bank (ECB)’s Luis de Guindos said tha recent inflation data is good news but it is too early to declare victory. 

The EUR/USD pair snaps the four-day losing steaks during the Asian trading hours on Tuesday. That being said, the renewed US Dollar (USD) lends some support to the pair. The major pair currently trading around 1.0840, gaining 0.05% for the day.

On Monday, the US Census Bureau showed that the US factory orders fell 3.6% MoM in October from a 2.3% rise in the previous reading. Earlier, the US ISM Manufacturing PMI came in weaker than expected and remained unchanged at 46.7 in November, the Institute for Supply Management (ISM) showed on Friday.

The Federal Reserve (Fed) Chair Jerome Powell claimed that U US monetary policy was slowing the economy as expected, with the benchmark overnight interest rate well into restrictive territory. While Powell emphasized the Fed's willingness to tighten policy further if necessary, markets were confident the rate-hike cycle was done. This, in turn, weighs on the Greenback across the board.

Across the pond, the slowdown in inflation brings the ECB's 2% inflation target back into clear focus for the first time since the summer of 2021, potentially signaling an adjustment in monetary policy. European Central Bank (ECB) Vice President Luis de Guindos said on Monday that recent inflation data is good news but it is too early to declare victory while mentioning that monetary policy stance will be data-dependent.

Moving on, traders will keep an eye on the ISM Services PMI and JOLTS Job Openings data on Tuesday. Later this week, Wednesday’s ADP will be released. The attention will shift to Friday’s Nonfarm Payroll (NFP) report, which is estimated to create 180K jobs in the US economy.

• Gold price posts modest gains around $2,030 in early Monday.
• The futures market is pricing the possibility that the Fed won't raise rates further in its next meetings.
• The Chinese Caixin Manufacturing PMI, US Services PMI will be due on Tuesday.

Gold price (XAU/USD) edges lower to $2,030 during the early Asian session on Tuesday. Meanwhile, the US Dollar Index (DXY) rose to 103.60 and the Treasury yields edge higher, with the 10-year yield recovering from 4.24% to 4.32%. At press time, gold price is trading at $2,030, up 0.12% on the day.

Federal Reserve (Fed) Chair Powell emphasized the Fed's willingness to tighten policy further if necessary and the markets were confident the rate-hike cycle was done. Powell stated that it was clear that US monetary policy was slowing the economy as expected, with the benchmark overnight interest rate well into restrictive territory. The anticipation of the tightening cycle ending might benefit the yellow metal. That being said, gold tends to rise with lower interest rates, whereas higher interest rates put pressure on the yellow metal.

About the data, the US Census Bureau revealed on Monday that the US factory orders fell 3.6% MoM in October from a 2.3% rise in the previous reading. Elsewhere, an attack on an American warship and commercial vessels in the Red Sea on Sunday fueled the fear of escalating conflicts between Israel and Hamas. This, in turn, might boost the safe-haven flow and benefit the yellow metal. 

Looking ahead, the Chinese Caixin Manufacturing PMI for November will be released and it is expected to improve from 49.5 to 49.8. The downbeat Chinese data could exert some pressure on the gold price as China is the world's largest gold producer and consumer. In addition, the November US ISM Manufacturing PMI and Fed Chair Jerome Powell's speech will be widely monitored.